2nd time unpaid taxes have come back to bite SF’s gated enclave

Overhead view of Presidio Terrace, the private street that was sold in a tax auction to a San Jose couple even as home
owners were in the dark.

Overhead view of Presidio Terrace, the private street that was sold in a tax auction to a San Jose couple even as home
owners were in the dark.

Photo: Matier & Ross, Courtesy Google

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An overview of the Presidio Terrace neighborhood in San Francisco.

An overview of the Presidio Terrace neighborhood in San Francisco.

Photo: Marcio Jose Sanchez, Associated Press

2nd time unpaid taxes have come back to bite SF’s gated enclave

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It turns out the Presidio Terrace homeowners who lost control of their own private street when a San Jose couple snapped it up at tax auction have been down this road before.

The owners of the homes in the exclusive enclave down the hill from the Presidio fumbled away their street, sidewalk and other common areas because they failed to pay a $14 annual tax bill for 30 years. They’re screaming bloody murder and want the Board of Supervisors to step in.

Last time, their beef was with the state.

San Francisco Assessor Carmen Chu tells us that her records show the Presidio Homeowners Association defaulted on its common-areas tax bill in the 1970s. Eventually, the state took possession of the common areas, and it wasn’t until 1985 that the association regained the title to its swanky sidewalks.

The street and sidewalks’ assessed value at the time was $221 — a figure Chu concedes was “super low.”

Chu conceded that the three-decade-old records are a bit thin on details. And Scott Emblidge, the attorney for the homeowners association, said he was trying to run down the information.

“I’m not aware of anyone at the Presidio Terrace being aware of a 30-year-old tax problem,” he told us Tuesday.

There’s no doubt the owners of the 35 multimillion-dollar mansions that make up Presidio Terrace had the wherewithal to pay their latest bill, which came to $994 when interest and penalties were included. But they didn’t, and now they’re doubling down on efforts to undo the sale of their gated street, where a guard is posted 24/7 to keep the unwanted out.

The San Francisco treasurer-tax collector’s office says the owners are out of luck: Auctions for unpaid property taxes have a one-year window during which the original owner can swing a deal to keep the property, but it’s been two years since the Presidio Terrace homeowners lost control of their street to Michael Cheng and his wife, Tina Lam, who bought it for $90,100.

“The sale is valid,” said Amanda Fried, a spokeswoman for the tax collector.

The homeowners want the clock turned back and the sale tossed.

“This is purely an oversight that needs to be corrected,” Emblidge said.

As we reported Monday, the tax collector’s office sold the street, sidewalk and other common areas in an online auction in 2015 after the homeowners association failed to pay up. The homeowners, however, say they didn’t learn of either the back taxes or the sale until this past May when they were contacted by an intermediary of the new owners, inquiring about their interest in buying back the property.

Photo: Nicole Boliaux, The Chronicle

Hiuyan Tina Lam, left, and her husband Michael Cheng, right, stand for a portrait on Presidio Terrace, a street she bought in auction from the City of San Francisco, that is inside the exclusive gated community of Presidio Terrace in San Francisco on Friday, August 4, 2017.

Hiuyan Tina Lam, left, and her husband Michael Cheng, right, stand...

Emblidge suspects the couple deliberately waited well over a year after their purchase to reach out, “presumably so the property sale would be more difficult to rescind.”

However, Cheng, who works as a real estate investor, told us it took almost a year for the sale to be completed.

The homeowners are trying to invoke a little-known provision of the state tax code in petitioning to toss the sale. It gives a county Board of Supervisors the power to rescind a sale if “it is determined that the property should not have been sold,” and says nothing about a one-year deadline.

The homeowners say there are plenty of good reasons why the sale was wrong. For starters, the city was sending the annual $14 tax bill to an accountant who retired in the early 1980s, they maintain. None of the property management companies the homeowners hired to oversee the common areas knew about the tax liability, Emblidge said.

When the city sent a registered notice of the tax auction to the homeowners association, it bounced back to the tax collector, the lawyer said.

Tough, says the tax collector: It’s on the homeowners association to alert the city to a change of address for tax bills.

The homeowners also complain that a notice of the pending sale should have been posted in the neighborhood. But Fried says the city does that only when a residence is going up for auction and someone could be evicted.

The supervisors have set a hearing for Sept. 5 to consider taking up the case. If they do so, they would hear arguments on Oct. 31. Happy Halloween.

One option would be to rescind the sale, have the homeowners pay their $994 in back taxes and refund Cheng and Lam their $90,100, plus interest.

Contra Costa County Tax Collector Russell Watts and his chief deputy, Brice Bins, said such actions are not unheard of. They said Contra Costa supervisors recently overturned a tax sale that had been improperly recorded, though that rescinding was within the one-year window.

As for San Francisco, Bins said, “Under the circumstances, the county probably has grounds or legal authority to rescind it they choose to.”

But experts say that rescinding the deal could be more difficult if Cheng and Lam first sell the property to someone else. As a result, the homeowners association has sued seeking to block any sale before the supervisors can act.

Meanwhile, relations between the two sides are not exactly rosy.

“They are opportunistic, know exactly what they bought, and would like to exploit a bureaucratic oversight to their advantage,” Emblidge said.

“I’m not trying to make money on anything,” said Lam, a Silicon Valley engineer. “I just wanted to buy a piece of San Francisco.”

San Francisco Chronicle columnists Phillip Matier and Andrew Ross appear Sundays, Mondays and Wednesdays. Matier can be seen on the KPIX TV morning and evening news. He can also be heard on KCBS radio Monday through Friday at 7:50 a.m. and 5:50 p.m. Got a tip? Call (415) 777-8815, or email matierandross@sfchronicle.com. Twitter: @matierandross